- Date : 10/01/2023
- Read: 3 mins
A few of the tips that can help the savings plan of a person for the New Year 2023
Probably the simplest mantra in personal finance is the 50/30/20 rule. Using it as a rule of thumb, you should spend 50% of your income after taxes on your needs, 30% on your wants and save the remaining 20%. However, financial objectives differ from person to person. Accordingly, these percentages may not be the same for everyone. It is a useful benchmark based on which a person can instil financial discipline in his or her life.
When it comes to your savings plan for New Year, you must have a broader plan on how to save money, using the 50/30/20 rule as a basis.
Learn While You Earn
While the 50/30/20 rule forms the basis, you may have to alter the percentages to be in sync with the current scenario. Before finalizing the savings plan for New Year 2023, you must look back at 2022 for the events that influenced the economy. Record high inflation and unemployment rates, changes in the central bank interest rate, fears of recession, East European crisis are the leading events that eventually affected your return on investments. While continuing with a savings plan for New Year, learn the underlying market condition and design your savings plan accordingly.
Budget Best Practices
The 50/30/20 rule says that you mustn’t spend more than 50% on needs. Go a step further and scrutinize your expenses regularly. Identify the expenses that can be avoided, and limit the wants to a bare minimum. This will increase your savings percentage, and you will end up saving more than what you have saved through the 50 30 20 rule.
Proactive Tax Planning
Anyone falling into the income tax bracket should plan their taxes well in advance. Many people leave it till March and hastily invest in tax-saving instruments. Starting a few months early gives you ample time to examine different investment options and keep your long-term investment in mind. In fact, it would be wiser to plan tax-saving investments for the next financial year as well. If you end up choosing any monthly investment options, you can start your savings plan from the first month itself.
Insurance may seem like an expense but it ends up saving a lot of money in times of need. The maturity amount of a children's insurance plan can help the parents to finance their higher studies. The sum claimed against health insurance can save a family from huge medical bills.
Saving is an ongoing process. You can keep it a disjointed exercise or convert it into a series of connected investments. Investments made today must be linked to expected milestones in life. A PPF or an NPS saving for retirement corpus or a Sukanya Samriddhi investment for a girl child’s higher studies is how investments can be linked to future financial needs.
In 2023 best savings plan would be a combination of the financial discipline of the 50/30/20 rule and astute and adjustable financial strategies. The guidance of a financial advisor will further boost your success in savings and investments.